Residue Interest

Pseudo61

What is residue interest? We asked why we had been charged interest even though we had paid off the total amount owed for the month.
We were told that the interest charged is "residue interest" from April...? I have never heard of this in relation to Credit cards!... The call centre Manager is going to call me back to explain..
We did not pay off the credit card in April, but we were charged interest in May which would be for that April interest..


Thanks!

Pseudo61

DestroyingAngel_2

It's called Residual Interest, or Trailing Interest. Basically, if you pay off your balance in full each and every single month on time, you'll never see any interest on your statements. It's when you stop paying the full balance, that interest starts accruing on a daily basis based on the balance.

As interest is calculated backwards, when you paid the May statement, you'd have been paying the interest for April. This means, provided you pay off the statement in full and on time for June, you'd be paying off whatever interest is left for May i.e Residual Interest. Once you've paid off the balance in full for 2 consecutive months, interest disappears. If you then continue paying in full and on time each and every single month, you'll never see interest again.

It takes 2 months' worth of payments for the interest to disappear. The 1st month you pay off in full will have the previous month's interest, as explained above. The 2nd month you pay off in full will have Residual Interest only, which is the interest that's charged on a daily basis from between the statement date and the day your payment cleared.

Hope this helps?!

r_nasey

I'd be interested to know which card you have. I've just had a similar situation with my Barclaycard Onepulse card. Having previously paid the minmum monthly amount, my 6 months interest free on purchases came to an end in June, at which point I duly paid off the entire balance. When this months statement arrived, it showed a £30 interest charge on a zero balance! According to the guy on Customer Services, this is due to "trailing interest". After a brief discussion, he agreed to waive this charge provided my card is paid off in full each month in future. Of course I have no intention of using the card again, and will be cancelling the card in the next few days, so hopefully it won't be an issue. However, I've been using credit cards in this fasion for 3 or 4 years now and have never come across this before, so does this signal the end of the card tart? Are they all going to do this now?

methusala_2

Again Nasey its this trailing interest. Lets say your interest free period ended on June 10th. If you only paid off the card on June 29th interest has accrued on a daily basis from June 10th to June 29th but can only appear on your July statement. This appears to you that you have been charged interest on a 0 balance.

Its important to get an exact date your interest period ends not just a Month and be sure to arrange payment to clear the month before the interest payment period ends.
Barclaycard are even worse as they only allocate payments to your account on your statement date, regardless of when they recieve them. So you will have paid interest in the above case from June 10th to June 30th when they will have allocated your payment to the debt.

Moggles_2

methusala wrote: »

Barclaycard are even worse as they only allocate payments to your account on your statement date, regardless of when they receive them. So you will have paid interest in the above case from June 10th to June 30th when they will have allocated your payment to the debt.

Exactly. If memory serves, Barclaycard wrote to existing customers last October/November time about this change in its terms. If you take up a 0% deal with Barclaycard, you need to take particular care with the expiry date

r_nasey

Just a quick update on my previous post. I thought I'd better check the interest fee had been waived as I had been told, and perhaps unsurprisingly, it hadn't. Apparently there is no record of my earlier conversation and presumably I would have been liable an overdue payment charge had I not checked. I think I've been dealing with barclaycard, but perhaps it was some back street loan shark in disguise. Not really the way to treat customers is it?
Have now paid off the outstanding charge, but won't be touching Barclaycard with a bargepole in future.

HamiltonL

It sounds like you did speak genuinely to someone from Barclaycard, but the person you spoke to failed to leave a comment on your account, nor did he even do anything. That is very poor, and leaving no notes after a conversation of that sort is against staff policy, a disciplinary matter even. I'm sure the call could be traced if you were considering complaining...

You can sometimes get residual interest on a third statement as well, depending on the size of the previous interest charge. E.g. pay off 30 quid residual int then the next statement has another quid approx.